Central Bank of Sri Lanka has taken a number of monetary and regulatory policy measures to induce a reduction in market lending rates over the past eleven months.
These measures include the reduction of the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points in two steps,
These include the reduction of the Statutory Reserve Ratio (SRR) applicable on rupee deposit liabilities of Licensed Commercial Banks (LCBs) by 2.50 percentage points that released around Rs. 150 billion of additional liquidity to the financial market.
It has imposed caps on rupee deposit interest rates offered by licensed financial institutions that enabled them to reduce the cost of mobilising funds from the general public.
The Central Bank has taken these measures with a view to supporting economic activity, given well contained inflation and inflation expectations.
Further slowdown observed in the economy following the Easter Sunday attacks has intensified the need for lower market lending rates.
Accordingly, the Monetary Board decided, to reduce interest rates applicable on all rupee denominated loans and advances by at least 200 basis points by 15 October 2019, in comparison to the interest rates applicable as at 30 April 2019, subject to certain exclusions.
With effect from 01 November 2019, in the case of credit card advances, the maximum interest rate applicable will be 28 per cent per annum, while in the case of pre-arranged temporary overdrafts, the maximum interest rates applicable will be 24 per cent per annum.
Penal interest rates added to loans and advances have been capped at 400 basis points per annum, for the amount in excess of an approved limit or in arrears, during the overdue period, with effect from 15 October 2019.
(LI)